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Mag 7 starting to underperform [pdf]

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Re: Mag 7 starting to underperform [pdf]

#91

Post by mixedbit »

Could outperformance of largest cap companies be partially explained by dividends paid by smaller caps? Reasoning behind this:

* Index investing raises in popularity, with index funds that automatically reinvest dividends being often preferred due to their tax efficiency.

* Large caps prefer to repurchase stocks, stock repurchases contribute fully towards a given company share price increase.

* Smaller caps still pay dividends, these dividends are then reinvested by index funds and the reinvestment is weighted by capitalization, so large caps share price benefits more from repurchases done with dividend cash paid by smaller caps. When dividend is paid, share price of a company that paid it is reduced, which further widens the performance gap between large and smaller caps.

Re: Mag 7 starting to underperform [pdf]

#92

Post by c22 »

Lerc wrote: post #38
M3L0NM4N wrote: post #30

Earlier quoted context omitted.

I mean these stocks have been performers for decades. If you posted this 10 years ago you'd look really wrong.

Yes, but when their run ends they tend to underperform. Every time.

Sometimes people bring me things that are broken 'cause I like to fix stuff. They always say "it was just working!"

Re: Mag 7 starting to underperform [pdf]

#96

Post by enopod_ »

patrickk wrote: post #7

On slide 6, they list the Mag7 stocks (not defined in a foreword), but on slide 8 they list the free cash flow (FCF) of a somewhat different set of companies. Why not stick to the Mag7 FCF only? It muddies the waters.

True. This slide also struck me the most, but for the data it shows. Free cash flow for all the hyperscalers basically evaporated in the last couple of months, with Oracle in the minus. What does this mean?

Re: Mag 7 starting to underperform [pdf]

#97

Post by dualvariable »

patrickk wrote: post #81
anonu wrote: post #11

Earlier quoted context omitted.

the FCF slide is for hyperscalers - which excludes TSLA, NVDA

Yes but the Mag 7 is the main focus, suddenly switching to a different set of companies is comparing apples to oranges. That slide belongs in an annex.

That slide should probably be the main focus, with the rest supplementary.

That is the slide that is likely to pop the economy.

Re: Mag 7 starting to underperform [pdf]

#98

Post by blehn »

zerobees wrote: post #31

I am invested in some of the companies that are downstream of the capital expenditures of Big Tech (e.g., COHR), so I have nothing to complain about. I am really struggling to see what's the investment thesis behind Google valuation increasing 2x in response to AI, though. Assuming no magical AGI singularity, by the end of the day, they're still selling the same services, but the services have gotten more expensive f…

Google is a good bet because if AI continues to boom, they're in a good position (frontier lab, vertically integrated). If the bubble bursts and the frontier labs fail, they might do even better.

Re: Mag 7 starting to underperform [pdf]

#99

Post by DaedalusII »

ares623 wrote: post #20
bwfan123 wrote: post #14

I like that the invisible hand of market is slapping the Mag-7 for capex which is the only way to discipline them. Investors are waking up to say: hey, you are spending all your profits on data-centers, where is the return for me ? But, it surprises me that there are vast pools of capital which we collectively call the "market" that makes these calculations, or maybe a simpler causal explanation is the missing stock…

Why is Apple included though?

because $100bn annual revenue, high FCF, high margin. Its a monster.

Re: Mag 7 starting to underperform [pdf]

#100

Post by Barbing »

dualvariable wrote: post #97
patrickk wrote: post #81

Earlier quoted context omitted.

Yes but the Mag 7 is the main focus, suddenly switching to a different set of companies is comparing apples to oranges. That slide belongs in an annex.

That slide should probably be the main focus, with the rest supplementary. That is the slide that is likely to pop the economy.

I was here when you called it!

Is that Oracle down there increasingly in the negative? & Amazon's free cash flow reaching zero?

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